Reagan Endorses Health Cost Limit : Proposes Plan to Expand Medicare to Cover Elderly’s Catastrophic Illness

Times Staff Writer

President Reagan, embracing a plan to “give Americans that last full measure of security,” Thursday proposed legislation to offer millions of older citizens expanded Medicare coverage for catastrophic medical bills.

With a wave of congressional sentiment favoring the new benefit, the President ignored strenuous opposition within his own Cabinet and from conservative groups angered by the idea of a bigger role for government in the health care field. Under the plan, first proposed in November by Secretary of Health and Human Services Otis R. Bowen, the government’s health care program for the elderly would provide unlimited days of hospital care for Medicare patients while limiting their out-of-pocket expenses to $2,000 annually.

“For far too long, many of our senior citizens have been faced with making an intolerable choice--a choice between bankruptcy and death,” the President said in a statement. “I am asking Congress to give Americans that last full measure of security, to provide a health insurance plan that fights the fear of catastrophic illness.”


Similar Plans in Works

The President’s endorsement will boost the legislation in Congress, where leading Democrats and Republicans already have expressed enthusiasm for the idea and where somewhat similar plans are already in the works in both houses.

“This is an important positive step,” said Rep. Pete Stark (D-Oakland), chairman of the health subcommittee of the House Ways and Means Committee. “We in Congress will be working to do even better, and I’m optimistic that we’ll succeed.”

Advocates for the elderly welcomed the President’s announcement but said they wished the plan had gone further and offered protection for stays in nursing homes and costly prescription drugs, neither of which is covered by Medicare.

” . . . We’re concerned that people understand it is not a full catastrophic protection plan,” said John Rother, legislative director for the 24-million member American Assn. of Retired Persons.

An alliance of groups repesenting the elderly, doctors, and hospitals sharply criticized another Administration plan to cut the growth of federal spending for Medicare and Medicaid, the health care program for the poor. The Administration has proposed trimming Medicare reimbursement to hospitals and setting a ceiling for Medicaid spending, leaving states to make up the difference or tighten their Medicaid eligibility standards.

But all of these groups agreed that Bowen’s plan for catastrophic medical bills represents an important advancement.

Now Get 59 Days Free

Medicare recipients, of which there are 30 million, now pay $520 for the first day in the hospital and receive the next 59 days free. After that point, the patient pays $130 a day. In doctor bills, patients pay 20% of the cost established by a government fee schedule and anything charged by the doctor over that set amount. There is no limit on total out-of-pocket expenses.

Under Bowen’s plan, the new unlimited hospitalization and $2,000 maximum for doctor and hospital bills would be financed by an insurance premium of $4.92 a month added to the current monthly premium of $17.90.

In Congress, the debate is expected to focus on the maximum patients will pay and the method of paying for the added protection.

A lower, $1,500 out-of-pocket limit is the target of a bipartisan bill being prepared by Stark and his subcommittee’s ranking Republican, Rep. Bill Gradison of Ohio. Their proposal also would link the cost of paying for the new program to patients’ incomes by making them pay taxes on the value of Medicare benefits. About 65% of the elderly do not earn enough to pay any federal tax, and thus would not be charged anything for the new Medicare benefit.

Cost Equals $1.8 Billion

In the Senate, the Finance Committee is expected to develop a package with a personal spending ceiling ranging between $1,500 and $2,000, according to committee sources. Several members also are interested in improving the current Medicare benefit for care at home for persons recently released from a hospital.

The total cost for Bowen’s plan would be approximately $1.8 billion, a relatively small addition to Medicare’s annual bill of approximately $70 billion.

Of the 30 million Medicare recipients, about 1.4 million a year have out-of-pocket medical costs exceeding $2,000.

Advocates for the elderly said that they would push in Congress for protection for the elderly who require care in nursing homes.

Polls Indicate Confusion

Polls show that a majority of Americans over 65 mistakenly believe Medicare will pay nursing home bills, which typically cost $22,000 a year. Only when nursing home residents have exhausted their life savings and qualified for welfare does the Medicaid welfare program begin to pay custodial nursing home bills. The Administration’s plan “protects against long hospital stays but not against what most people face in a catastrophic risk: the expenses of long nursing home stays, or costly prescription drugs, or physician fees not covered by Medicare,” said Rother.

Bowen told a White House news conference that nothing can be offered for nursing home care.

He said that younger workers should begin saving now for the nursing home bills they might incur in old age and that the ultimate answers may include special tax-free medical savings accounts and development of special private insurance policies.

The coalition of groups who blasted the Administration’s proposal for a cap on Medicare and Medicaid spending said they would lobby hard in Congress to defeat that plan.

‘Gargantuan Cuts’

“These are gargantuan cuts in programs vital to the nation,” Dr. James Sammons, executive vice president of the American Medical Assn., told a news conference.

The Administration wants to cut $50 billion during the next five years from the amount of money that would be spent if current laws and budget policies remain unchanged.